In 1989, when the point of use industry was just a twinkle in the eye of water cooler distributors stateside, young entrepreneur Jeff Doughty saw a gap in the market. So, in the same year that the Soviets invaded Afghanistan, students protested in Tiananmen Square, and Paula Abdul topped the charts, MBA student Doughty became sole founder of Spectrum Water Coolers.
Jeff started the business several months after completing his MBA, and prior to that his undergraduate degree from Cornell University. As a graduate student, he had carried out research into the emergence of the bottled drinking water industry in the US, mostly on the west coast, and found that there were several dozen bottled water companies delivering five-gallon (19-litre) bottles to the Washington DC market.
At that time, Cordley/Elkay Manufacturing began converting bottled water coolers to point of use coolers. So, as was the case with so many water cooler companies in the early days, Jeff launched the business as a sole proprietor, carrying out all aspects of the business, from selling and installing, to service, administration and finance.
What was the rationale at the time of founding?
Jeff Doughty: I had always been an entrepreneur and wanted to start a company after graduate school. I found out that delivered bottled water was a growing business in Washington DC. Nobody had ever seen a point of use (POU) water cooler, and there were limitless opportunities to sell POU coolers to offices of all sizes in the area. At the time I was debt free, unmarried, and free to create a start-up company!
Did you or any other members of the team have a background in drinking water provision?
Doughty: In the late 1980s and early 1990s, there were no people with experience in POU coolers! At one point in the early 1990s, I hired a former bottled water salesperson to sell filtered coolers. Spectrum didn’t hire employees with water experience until the late 1990s, when we hired technicians experienced in installing coffee brewers and water coolers. The vast majority of our knowledge and training programmes were developed in-house, as we were at the forefront of the filtered cooler industry in the US.
How has the company changed and developed over the years?
Doughty: Because we were, by most accounts, the first company in the US to market POU coolers exclusively, the company has changed and developed in many ways in 20 years. The main changes are that we’ve developed many protocols and quality standards for water cooler installations, developed new techniques for running water lines throughout buildings of all types, and taken the decision to go into the office coffee service.
How do you view Spectrum within the North American water cooler market today?
Doughty: I view Spectrum as the top provider of POU coolers in the US. We have the most experience and knowledge about POU cooler solutions, filtration systems and available technologies of any company marketing filtered coolers today in the US. We consistently strive to stay ahead of what the US market will demand in terms of cooler features and services offered.
Where are the real growth areas for your business?
Doughty: In the US, there’s a tremendous growth opportunity for POU coolers. With only 10-11% market penetration versus bottled water coolers, the US market is considerably behind Europe in the adoption of filtered coolers. I believe there’s a great opportunity for a national market leader to emerge in the US for POU coolers. It hasn’t happened yet.
With the difficult economy, customers are looking for ways to cut costs, and eliminating delivered bottled water is one of the easiest ways to become more environmentally friendly and cut costs considerably. We have very good success with national account sales and feel that it’s also a growth opportunity for Spectrum. We also feel there’s a growth opportunity by offering office coffee and POU cooler products to the same clients.
How do you source your water coolers? Do you design and manufacture any of your own products?
Doughty: We purchase from multiple manufacturers to match the needs of our clients. We don’t manufacture, or commission the manufacture, of any of the water coolers that we sell, though we have helped in the design and features development of many new water coolers in the past. We’re traditionally called upon to assist in the prototype phase of a new cooler launch to help find design flaws and suggest areas of improvement.
Which are your most popular water cooler models?
Doughty: We carry a broad range of products, including around 20 different water cooler models. Popular technologies include in-tank UV light and direct chill, leak detection systems and BioCote technology.
You’ve recently branched out into the office coffee service business. Do you see this as a natural tie-in with providing POU water coolers?
Doughty: I definitely see a natural tie-in for Spectrum’s Office Coffee Services (OCS) to provide coffee solutions to our existing and future POU cooler customers. We have a large selection of name-brand and private-label coffees, teas, coffee-related products and break room supplies. Office coffee is a natural add-on to POU coolers, as it’s often the same decision maker, and bids and tenders are frequently put out that combine office coffee and water coolers. Nearly every OCS operator in the US has a POU cooler offering today.
You also provide ice machines. Has this proved popular?
Doughty: The ice machine service is an add-on business. We offer it so we can be a full service provider for those clients who request it. We typically tie our filters into ice machines and found that clients often asked us if we could also provide ice machines. It was very simple to add them to our product mix.
As a distributor, are you always looking for new supplier products for your customers?
Doughty: We look for high-quality products with a minimum of downtime, which provide something new or unique in the industry, or save time and provide more secure installations.
Is there a water cooler yet to be designed that would be popular in the marketplace?
Doughty: We believe we’re working on cooler models to be launched soon that would fill the current gaps that we’ve identified in the US market.
Is the North American office drinking water market still in a healthy state, and is there potential for more growth?
Doughty: The growth of POU coolers is just beginning in the US and there’s tremendous potential. That said, the US economy will create challenges and a potential shake-up for bottlers and POU dealers. The bottled water providers must deal with the challenges of the environmental backlash against bottled water, as well as the cost-cutting actions of consumers and office purchasing managers.
POU cooler dealers will deal with challenges associated with the US credit crunch and customers having difficulty paying invoices, while at the same taking advantage of the environmental and cost advantages.
The US is nearly 10 years behind Europe in terms of adoption of POU. For the past 15 years, the market has been dominated by low-feature, low-priced coolers provided by companies that typically don’t provide coolers as their main line of business. We believe there’s potential for tremendous growth in POU to trend away from bottled water, cut costs and be more environmentally friendly.
Is POU a popular idea in the US today?
Doughty: The awareness of POU has changed dramatically in the last five years, with large and small clients searching for POU cooler solutions. Prior to that, it was somewhat rare to find prospects familiar with POU coolers.
Over the past four years or so, environmental aspects have added yet another reason for customers to choose POU, in addition to cost savings and convenience. Security issues have played a role in adoption of POU, especially in some segments of the market, such as government contractors and high tech.
What do you think are the key elements to survival in a tough marketplace?
Doughty: The US POU cooler market does have challenges, and it has become somewhat more difficult to operate in the last 12 months. The US credit crunch has eliminated some clients and prospects through bankruptcy and mergers. Financing of operations and contracts has also become tighter. In our eyes, the key elements to survival are to have a strong and unique selection of coolers, strong financial backing, and customer service that keeps clients for a lifetime.
A winning formula
Doughty: What are your main ways of winning new business? And what are your most effective methods for keeping churn rates down? Our main ways of winning new business are to identify clients that need our services and efficiently schedule face to face sales calls with those clients. Our websites are very effective sales tools to educate our prospects and prompt them to contact us.
Providing the highest level of training to all our employees, and having levels of expertise that our competitors don’t have, comes through very clearly to our prospective clients, as does offering unique and proprietary products and a broad selection of coolers and coffee products.
What do you think are the most effective methods of marketing for your business?
Doughty: The top four methods for us are: direct sales to targeted large accounts, referrals, websites and public relations.
Do you have a company mantra?
Doughty: Treat your customers and your colleagues as you would like to be treated – the golden rule for business.
How important are environmental issues to your business, and how are you approaching them for the future?
Doughty: Environmental issues are extremely important to Spectrum, both internally and externally. We practice what we preach when it comes to being environmentally friendly in our office, by recycling and using green and energy saving products. We see that the environmental advantages of our POU coolers are extremely important to our clients when making decisions. These advantages are especially important when they can be combined with substantial cost savings.
Do you try to foster a certain spirit within the company?
Doughty: Our hiring philosophy is to identify and hire people that are highly qualified, but also those who will fit well into the laid-back company culture and enjoy spending time with the others in the office. Our culture is one that encourages interaction across all departments, and we have regular full-company lunches and meetings to update employees from all departments.
What are your main ambitions for Spectrum in the future?
Doughty: The company is growing rapidly and we expect to grow at over 50% per year for the next five years. We’ll continue to grow nationally and develop a large client base across the US. We want to maintain our current client base with superior customer service and responsiveness, while consistently adding local and national clients.
**Hannah Oakman is editor of Cooler Innovation magazine. Click here to subscribe.**
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